I too have seen the "**\process.exe" thing. This seems to be a DoD-specific problem.
I have asked McAfee about this issue, and they've said that they have never seen this problem before. For us, we get these way too much to be a one-off problem. My belief is that it has something with the way Application Blocking exceptions are written. I would love to know the solution if there is one, as there seems to be no way to allow for HIPS exceptions for these items.